Correlation Between Shinsegae Information and KPX Green

Can any of the company-specific risk be diversified away by investing in both Shinsegae Information and KPX Green at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Shinsegae Information and KPX Green into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shinsegae Information Communication and KPX Green Chemical, you can compare the effects of market volatilities on Shinsegae Information and KPX Green and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Shinsegae Information with a short position of KPX Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinsegae Information and KPX Green.

Diversification Opportunities for Shinsegae Information and KPX Green

0.6

Correlation Coefficient

Shinsegae Information  KPX Green

Poor diversification

The 3 months correlation between Shinsegae and KPX is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Shinsegae Information Communic and KPX Green Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KPX Green Chemical and Shinsegae Information is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Shinsegae Information Communication are associated (or correlated) with KPX Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KPX Green Chemical has no effect on the direction of Shinsegae Information i.e., Shinsegae Information and KPX Green go up and down completely randomly.

Pair Corralation between Shinsegae Information and KPX Green

Assuming the 90 days trading horizon Shinsegae Information Communication is expected to generate 0.83 times more return on investment than KPX Green. However, Shinsegae Information Communication is 1.21 times less risky than KPX Green. It trades about 0.05 of its potential returns per unit of risk. KPX Green Chemical is currently generating about 0.02 per unit of risk. If you would invest  1,127,621  in Shinsegae Information Communication on September 26, 2024 and sell it today you would earn a total of  403,379  from holding Shinsegae Information Communication or generate 35.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Shinsegae Information Communic  vs.  KPX Green Chemical

Shinsegae Information

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shinsegae Information Communication are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shinsegae Information sustained solid returns over the last few months and may actually be approaching a breakup point.

KPX Green Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KPX Green Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KPX Green is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shinsegae Information and KPX Green

The main advantage of trading using opposite Shinsegae Information and KPX Green positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinsegae Information position performs unexpectedly, KPX Green can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in KPX Green will offset losses from the drop in KPX Green's long position.

The idea behind Shinsegae Information Communication and KPX Green Chemical pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.